Reconciliation of pro forma and statutory profit from operations

The table below sets out the key reconciling differences in profit from operations on a pro forma basis compared with a statutory basis for 2008 and the comparative period. The statutory Group profit from operations for 2008 reflects 100% of the results of Thomas Cook Group plc for the eleven month period ending on 30 September 2008. The statutory Group profit from operations for 2007 reflects 100% of Thomas Cook AG for the twelve month period ending 31 October 2007 and 100% of MyTravel Group plc and Thomas Cook Group plc from 19 June 2007 (being the date of the merger) to 31 October 2007. Consequently, the first adjustment in the table removes the pre-merger results of MyTravel Group plc from the comparative period. As MyTravel Group plc made losses in the winter period 2007, this adjustment improves statutory profitability in 2007.

The pro forma information has been produced on the assumption that the accounting reference date for Thomas Cook Group plc has always been 30 September 2008. As a result, the second adjustment removes the pro forma October 2007 result from the current period and replaces the pro forma October 2006 result with the statutory October 2007 result in the prior year period.

In preparing the pro forma profit from operations, account was taken of the impact of acquisition accounting. As part of the fair value adjustments, a provision was made in respect of above market rate hotel lease rentals. In addition, the value of aircraft held on the balance sheet was reduced. In the pro forma figures, we have assumed that both of these adjustments were made prior to 1 October 2006 and, as a result, the impact of a full year of lower rental costs and reduced depreciation has been reflected in the pro forma profit from operations in the comparative period. The net effect of these fair value adjustments has been to increase the pro forma profit from operations for the prior period by £11.7m. The third adjustment, therefore, removes the impact of this adjustment from the pre-acquisition period.

The IAS 39 business combination adjustment represents unrecognised losses on hedging instruments taken to reserves within the MyTravel business prior to the date of the business combination. On consolidation these amounts are included within goodwill and are therefore not recognised in the pro forma figures, but increase statutory profit from operations.

See Appendix 2 for key and the income statement which reconciles statutory Group profit from operations of £363.4m to statutory profit before tax of £49.5m